Limited Brands Inc. (LTD), a specialty retailer of women’s intimate and other apparel, beauty and personal care products, posted better-than-expected sales results for the four-week period ended January 28, 2012, boosted by healthy sales at its Victoria's Secret Stores. The company also updated its fourth-quarter 2011 earnings outlook.
January Sales
The owner of Victoria's Secret Direct and La Senza chains has sustained its growth momentum. Limited Brands’ comparable-store sales for January 2012 rose 9% following an increase of 7% in December 2011 and compared with a 24% jump in January 2011.
Comparable-store sales for January increased 17% at Victoria’s Secret Stores & Victoria’s Secret Beauty, but it fell 3% at Bath & Body Works & The White Barn Candle Co. and 8% at La Senza. Sales at Victoria’s Secret Direct climbed 3%.
Limited Brands, which competes with Hanesbrands Inc. (HBI), said that net sales for January edged up 0.2% to $774.5 million from $772.6 million posted in the same month of the prior year.
Limited Brands fared far better than its peer Gap Inc. (GPS), who posted a comparable-store sales decline of 4% compared with a growth of 3% in the prior-year period.
Fourth Quarter Sales
Limited Brands hinted at comparable-store sales growth of 7% during the fourth quarter of 2011, compared with 9% in the previous quarter and 10% in the prior-year quarter.
Comparable-store sales for quarter rose 12% at Victoria’s Secret Stores & Victoria’s Secret Beauty and 3% at Bath & Body Works & The White Barn Candle Co., but fell 3% at La Senza. Sales at Victoria’s Secret Direct grew 3%.
Net Sales during the fourth quarter rose 1.7% to $3,515 million from $3,456 million. The sale of a third-party apparel sourcing business in November adversely impacted the total revenue to some extent. However, the sales for the quarter came ahead of the Zacks Consensus Estimate at $3,486 million.
Buoyed by better-than-expected sales results, management now expects fourth-quarter 2011 earnings to be at the high end of the range of $1.42 to $1.46 per share, forecasted earlier. The current Zacks Consensus Estimate for the quarter is $1.46.
Fiscal Sales
Limited Brands’ comparable-store sales for fiscal 2011 climbed 10% compared with 9% in the prior year.
Comparable-store sales jumped 14% at Victoria’s Secret Stores & Victoria’s Secret Beauty and 6% at Bath & Body Works & The White Barn Candle Co., but fell 2% at La Senza. Sales at Victoria’s Secret Direct grew 4%.
For fiscal 2011, net sales jumped 7.8% to $10,364 million from $9,613 million reported in the prior-year period.
In Conclusion
The company’s Bath & Body Works segment is gaining traction, driven by a rise in store transactions, enhancement in the direct channel business and growth in new stores. Victoria’s Secret Stores have been performing well, and the company is also revamping its La Senza brand.
Limited Brands is keen to augment its retail footprint across the globe by expanding aggressively in Canada and other international markets. Moreover, the company’s strong liquidity positions it for growth and higher returns. However, stiff competition and erratic consumer behavior remain matters of concern.
Currently, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, Limited Brands holds a Zacks #3 Rank that translates into a short-term ‘Hold’ rating, and correlates with our long-term view.
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